President Donald Trump's cancellation of Obamacare’s cost-sharing reduction payments will increase premiums by 20 percent, cost the government $194 billion in higher subsidy payments, widen the deficit, destabilize insurance markets, increase the number of uninsured Americans, and cause chaos in health markets in the runup to the 2018 election. There is literally nothing in the health care system it makes better; it's pure policy nihilism. So why did Trump do it?
One theory goes that Trump does not believe the payments are constitutional when made in the absence of congressional authorization. This is a widely held view among Republicans, and it has received some affirmation from the courts. But coming in a week when Trump called freedom of the press “disgusting” and mused about yanking NBC’s broadcasting license in retaliation for a story he didn’t like, it has been a hard argument for advocates to make with a straight face. The other problem with this view is that Trump is not pushing Congress to authorize the payments and end any doubt over their legality — he is simply canceling them.
Which brings us to the second theory, which comes from Trump himself and is more plausible. Trump has long held the view that if he can inflict sufficient damage to the Affordable Care Act, Democrats will have no choice but to cut a deal — on Trump’s terms — to save it.
The Democrats ObamaCare is imploding. Massive subsidy payments to their pet insurance companies has stopped. Dems should call me to fix!— Donald J. Trump (@realDonaldTrump) October 13, 2017
Like much of the Trump presidency, this stratagem has deep roots in recent Republican politics. Hostage taking of this sort was routine during Barack Obama’s presidency. In 2011, for instance, congressional Republicans threatened to force the US government to default on its debt unless Obama offered massive policy concessions; in 2013, Sen. Ted Cruz led Republicans in shutting down the federal government in a last-ditch effort to stop Democrats from implementing the Affordable Care Act; since Obamacare went into effect, Republicans have done everything in their power to sabotage its operations and drive premiums up and insurers out.
Behind this theory lay a cynical, but accurate, understanding of American politics. The party that controls the White House, the GOP reasoned, absorbs both credit and blame for the state of the country. If bills passed with bipartisan majorities, the economy grew, and Americans could purchase affordable health insurance with the ACA’s help, the Obama administration — and its Democratic allies — would prosper. But if the political system fell into chaos, the economy remained fragile, and Obamacare proved a mess, Republicans would reap the rewards.
What Republicans understood, in other words, was that elections are referendums on the governing party, and that means the minority party can prosper politically by setting fire to the country and gain negotiating leverage merely by credibly threatening to set fire to the country.
Trump’s decision to choke off the federal payments stabilizing premiums and insurance markets is based on a similar theory — bad policy will lead to political pain, which will give Republicans negotiating leverage:
3 Republicans and 48 Democrats let the American people down. As I said from the beginning, let ObamaCare implode, then deal. Watch!— Donald J. Trump (@realDonaldTrump) July 28, 2017
The problem with this theory is that Democrats no longer hold the White House, or anything else. Republicans, led by Trump, hold total power. They are the governing party, and they stand to absorb the blame for the state of the country. According to an August poll by the Kaiser Family Foundation, by a margin of 60 to 28 percent, Americans now say Republicans are now responsible for the Affordable Care Act:
An October Kaiser poll tested the Trump administration’s strategy more sharply. Asked whether the White House should try to make the law work or undermine it to smooth the path toward replacement, the public urged Trump to make the law work by a stunning 71 to 21 percent margin:
In a perceptive post on the Trump administration’s recent actions, the conservative commentator Yuval Levin wrote that their new health policy is “presumably ... based on some assessment of the net effect, and of the relative significance of the problems it is addressing and the problems it is creating.” That strikes me as optimistic in describing a White House with so little internal policy processes, and where the key decision-maker is so disinterested in the details of policymaking. Instead, it seems likelier to me that this decision is based on a theory of dealmaking — a topic Trump really is interested in — and that that theory may well be flawed.
Trump’s view, as I understand it, has been that Obamacare is so thoroughly associated with Democrats that any problems it faces will be blamed on them. Ten months ago, he might have been right. But he is president now, and his compulsive monologuing of his own master plan has ensured that the country knows he is actively undermining the law, and is prepared to blame him for the results.
Like the Republicans who came before him, Trump is trying to gain leverage by sabotaging the governance of the country; unlike the Republicans who came before him, Trump is responsible for the governance of the country, and so he is sabotaging himself. This would all be quite comic if not for the millions of people who badly need decent health insurance and are going to suffer as Trump teaches himself this lesson.
- For an excellent overview of the legal dispute around the cost-sharing reduction payments, read law professor Nicholas Bagley’s history of the case.
- The Congressional Budget Office has analyzed the effects of canceling the payments, and their predictions are grim. The key point is that “gross premiums for silver plans offered through the marketplaces would be 20 percent higher in 2018 and 25 percent higher by 2020,” which would in turn send federal subsidies skyrocketing.
- The Kaiser Family Foundation also has an excellent report on the subject, which concludes, among other findings, that “the increased cost to the federal government of higher premium tax credits would actually be 23% more than the savings from eliminating cost-sharing reduction payments.”
- For these reasons and others, it’s not just Democrats upset over Trump’s decision. Nevada’s GOP Gov. Brian Sandoval blasted the policy: “It’s going to hurt people. It’s going to hurt kids. It’s going to hurt families. It’s going to hurt individuals. It’s going to hurt people with mental health issues. It’s going to hurt veterans. It’s going to hurt everybody.”